China’s leadership says it will introduce economic reforms and allow its currency to float to bolster growth.
It came at the country’s annual parliamentary session. Prime Minister Wen Joabao said Beijing had to cut its growth target from 8% to 7.5% in order to meet economic challenges.
He also indicated greater flexibility in the Yuan: “The exchange rate might have reached an equilibrium, we’ll continue to push forward on the exchange rate,” he said.
The government believes lower growth will allow China to reform key price controls, without causing a surge in inflation. That should guarantee a steady flow of credit to small and medium-sized firms that Beijing wants to see flourish as part of broader economic and political reforms.
Wen and President Hu Jintao are stepping down next year and are anxious to ensure economic stability as maintained amid a transition to a new generation of leaders.